Self-organized criticality in a network of economic agents with finite consumption

TL;DR

This paper presents a model of economic agents that exhibits self-organized criticality, reproducing financial market indices and their characteristic exponents based on network topology.

Contribution

It introduces a novel network-based model linking agent interactions to critical phenomena in financial systems, clarifying the origin of market index fluctuations.

Findings

Reproduces the evolution of financial indices.

Retrieves the characteristic exponent of market fluctuations.

Links index behavior to network topology.

Abstract

We introduce a simple model for addressing the controversy in the study of financial systems, sometimes taken as brownian-like processes and other as critical systems with fluctuations of arbitrary magnitude. The model considers a collection of economical agents which establish trade connections among them according to basic economical principles properly translated into physical properties and interaction. With our model we are able to reproduce the evolution of macroscopic quantities (indices) and to correctly retrieve the common exponent value characterizing several indices in financial markets, relating it to the underlying topology of connections.